TURNAROUND TUESDAY IS ON, MY
FRIENDS.
THE ONLY QUESTION HOW LONG WILL
IT LAST?
WHO BETTER TO GO TO THAN "SHARK
TANK" INVESTOR KEVIN O’LEARY.
WELCOME BACK.
>> THANK YOU.
GREAT TO BE HERE.
NEIL: WHAT IS REAL, WHAT IS
GOING ON YESTERDAY OR WHAT IS
GOING ON TODAY?
>> COMBINATION OF BOTH.
RIGHT NOW THE NARRATIVE WITH
INVESTORS IN THE BANKING SECTOR
IS HOW PUNITIVE IS THIS GOING TO
BE IN NEW REGULATIONS?
LET’S TAKE THE REGIONALS FIRST.
THERE WILL BE PROBLEMS AHEAD
HERE BECAUSE FRANKLY I DON’T
THINK GUARANTYING DEPOSIT IS
ENOUGH TO KEEP EVERYBODY WITH
ALL OF THEIR MONEY IN A REGIONAL
BANK.
THERE WILL BE DIVERSIFICATION.
EVEN OUR OWN PORTFOLIO WE MOVED
OUR ASSETS ACROSS FIVE DIFFERENT
FINANCIAL INSTITUTIONS.
I DON’T CARE ANYMORE TO TAKE
RISK, CONCENTRATED RISKS.
I THINK OTHERS WILL DO THE SAME.
THAT IS PROBLEM NUMBER ONE.
NUMBER TWO, IF YOU’RE A REGIONAL
BANK, I THINK ALL KINDS OF NEW
REGULATIONS KEEP YOU MORE LIQUID
SHORT TERM.
YOU CAN’T DEPLOY THE CAPITAL TO
MAKE RETURNS FOR SHAREHOLDERS.
THIS BIGGER QUESTION WILL WEIGH
ON THE ENTIRE SECTOR?
WHAT DID WE JUST DO?
DID WE JUST NATIONALIZE THE
BANKING SYSTEM?
IF THERE IS NO RISK AT ALL FOR
ANY DEPOSITOR OF ANY SIZE WHAT
STOPS BANKING MANAGERS WHO ARE
JUST COMPENSATED ON EQUITY FROM
JUST GOING CRAZY AND DOING
THINGS THAT ARE GOING TO BE VERY
EXTENDED IN BEHAVIOR TO JACK UP
THE STOCK PRICE BECAUSE THEY
HAVE NO RISK?
YOU HAVE ALWAYS IDIOT MANAGERS,
BLACK SWAN TYPES AT SILICON
VALLEY BANK DOING STUPID THINGS.
WE HAVE MORE OF THOSE BLACK
SWANS SWIMMING IN THE LAKE.
WE DON’T KNOW WHERE THEY ARE.
WE BASICALLY HAVE TO MAKE A
DECISION.
THIS IS SOMETHING EVERY INVESTOR
IS THINKING ABOUT, MAYBE THIS
SECTOR, 11 SECTORS IN THE
ECONOMY.
THIS SECTOR OFFICES ALL OTHER
10.
MAYBE IT IS UTILITY WILL BE WAY
OVERREGULATED AND MAKE REALLY
LOUSY RETURNS FOR SHAREHOLDERS
GOING FORWARD AND I THINK THAT
IS THE DEBATE GOING FORWARD.
NEIL: ANOTHER DEBATE GOING
FORWARD, THAT OF GOOD INTENTIONS
POTENTIALLY COULD GO BAD,
CONCERNING THE SILICON VALLEY
BANK RESCUE.
KEN GRIFFIN THE BILLIONAIRE
INVESTOR SAID IT WAS A MISTAKE.
WE WILL RUE THE DAY.
HE SAID U.S. CAPITALISM IS
BREAKING DOWN BEFORE OUR EYES.
WHAT DO YOU THINK OF THAT?
>> NO, IT IS A BOLD STATEMENT
BUT I THINK IT’S NARRATIVE THAT
IS COMING INTO THE MARKET IN
TERMS OF VALUING WHAT THE VALUE
OF BANKS IS AND WILL BE YOU KNOW
IN THE FUTURE BECAUSE, THE THING
WE HAVE TO THINK ABOUT THAT
STARTED ALL OF THIS AND THE
NARRATIVE ONLY 48 HOURS OLD,
THIS IS NO DIFFERENT THAN A
REALLY BAD MANAGER AT ANY OTHER
SECTOR.
SO THE COMBINATION OF IDIOT
MANAGEMENT AT SILICON VALLEY
BANK WITH A BOARD, OVERSEEING
BOARD THAT WAS INCOMPETENT OR
NEGLIGENT OR BOTH AND OBVIOUSLY
YOU JUST ANNOUNCE THEY WILL BE
INVESTIGATED OF COURSE THAT
SHOULD HAPPEN BUT THAT IS AN
ISOLATED INCIDENT.
IF WE LET THAT COLLAPSE BEFORE
WE GOT INTO PANIC WE WOULD HAVE
A MUCH BETTER SITUATION THAT
WOULD HAVE SAID, OKAY, 95% OF
THESE ASSETS WERE COVERED.
NO PROBLEM.
AND SO 5% FOR PEOPLE THAT HAD
MORE THAN 250,000 PER ACCOUNT IS
SOMETHING THE BANK COULD HAVE
ABSORBED.
THOSE INVESTORS ARE VERY HIGH
NET WORTH INVESTORS OR THEY’RE
VERY SOPHISTICATED HEDGE FUNDS
AND OTHER BUSINESSES THAT CAN
TAKE A 5% HIT.
THAT IS NOT WHAT WE DID.
AS A, AS GOVERNMENT SAID WE HAVE
CONCERN ABOUT THE OVERALL
BANKING SYSTEM.
LET’S GUARRANTY EVERYTHING.
THAT IS MORAL HAZARD RIGHT
THERE.
THAT IS SOMETHING ELSE PEOPLE
HADN’T FOCUSED ON PRIOR TO THIS.
THIS WHOLE NARRATIVE STARTED
AROUND PAYROLL.
MY GOODNESS IF MY MONEY IS
SITTING IN SVB, I CAN’T MAKE
PAYROLL WHICH IS ILLEGAL MANY
STATES PARTICULARLY CALIFORNIA.
THE GOVERNMENT ALREADY ALLOCATED
$250 BILLION PLUS INTO SOMETHING
CALLED THE EMPLOYER RETENTION
CREDIT PROGRAM BACK IN 2020,
NOBODY TOOK ADVANTAGE OF IT.
NOBODY EVEN CALLED IT DOWN.
LESS THAN NINE BILLION WAS PUT
TO WORK.
WHY AREN’T PEOPLE LOOKING AT
THAT?
IT IS STILL AVAILABLE FOR THE
NEXT 23 MONTHS?
I PEOPLE START TO LOOK AT THAT
WILL LOOK AT NOW TOO.
THERE ARE PROBLEMS WE JUST DID.
POLICY HAS UNINTENDED CON
SEQUENCESES.
NATIONALIZING THE BANK I THINK
WHAT HAPPENED HERE.
NOW GOING FORWARD I THINK A LOT
OF BANK MANAGERS, WAIT A SECOND,
I HAVE NO RISK.
I’M GOING TO GO CRAZY LIKE THOSE
GUYS DID AT THE SILICON VALLEY
BANK DO STUPID LEVERAGED THINGS.
IF ANYTHING GOES WRONG, AS LONG
AS I STAY WITHIN THE BASEBALL
RULES OF BANKING NOTHING CAN
HAPPEN AT ME BECAUSE THE FED
COVERS ALL MY DEPOSITORS.
I DON’T HAVE TO WORRY IF I’M
CRAZY THAT IS THE PROBLEM WE
GOT.
NEIL: THAT IS VERY INTERESTING.
ROBERT KIYOSAKI OF RICH DAD,
POOR DAD FAME, IT DOESN’T STOP
HERE, SILICON VALLEY, REGIONAL
BANKS, IT GOES HIGHER.
RESPOND TO THIS, KEVIN.
THIS AGAIN FROM ROBERT KIYOSAKI.
>> LET ME SAY IT AGAIN AGAIN,
THE PROBLEM IS THE BOND MARKET
AND MY PREDICTION, I CALLED
LEHMAN BROTHERS YEARS AGO AND I
THINK THE NEXT BANK TO GO IS
CREDIT SUISSE.
IF THAT HAPPENS JAPAN --
NEIL: BECAUSE OF ITS EXPOSURE TO
A LOT OF THIS?
>> YES.
BECAUSE THE BOND MARKET IS
CRASHING.
NEIL: BIGGER FISH ARE ON THE
WAY, DO YOU BUY THAT?
>> I DON’T CONSIDER
CREDIT SUISSE BIGGER FISH.
IF CREDIT SUISSE IS GOING TO
FAIL, LET IT FAIL.
MY WHOLE POINT WE SHOULD HAVE
LET SILICON VALLEY BANK FAIL,
SIGNATURE BANK FAIL.
THAT IS NOT THE END OF OUR
SYSTEM.
THEY REPRESENT A TINY FRACTION
OF THE ECONOMY.
THE WHOLE ISSUE IS AROUND
CONFIDENCE IN BANKING.
I THINK COOLER HEADS WOULD HAVE
PREVAILED 48 HOURS LATE, REALLY
95% OF THE ASSETS ARE
RECOVERABLE IN SILICON VALLEY
BANK.
YOU TALKED A LITTLE BIT ABOUT
SELLING THIS BANK.
THE FRANCHISE VALUE OF THE WORD
SILICON VALLEY BANK HAS BEEN
TRASHED.
IT IS NO BETTER THAN RADIOACTIVE
WASTE IT HAS BECOME THE POSTER
BOARD FOR IDIOT MANAGEMENT.
NO ONE WILL WANT THE BRAND, NOT
HERE, NOT ANYWHERE.
I’M NOT REALLY CONFIDENT THEY
ARE GOING TO GET BOUGHT.
WHEN YOU BASICALLY GUARRANTY A
BAILOUT FOR EVERY SINGLE
DEPOSITOR, WHAT ABOUT PEOPLE
OUTSIDE PAINTING THE STEPS, OR
PERSON THAT RUNS THE KITCHEN,
ALL THOSE CREDITORS IN THERE,
THEY WILL GET NOTHING.
THAT SOUNDS VERY UNFAIR.
SO THAT IS THE NATURE OF WHAT IS
OCCURRING HERE BUT AT THE SAME
TIME WHEN ONE BANK FAILS IT
DOESN’T MEAN EVERYONE OF THEM
FAILS.
IS THIS NOT LIKE 08 IN ANY
MEASURE.
THAT WAS EVERYBODY’S
MORTGAGE-BACKED SECURITY
PROBLEM.
SILICON VALLEY BANK HAD STUPID
LOANS OUT, THAT IS THE BOTTOM
LINE.
EVERYBODY FIGURED THAT OUT.
NOBODY EVER HEARD OF THIS BANK
JUST 48 HOURS AGO.
NOW THEY’RE THE POSTER BOARD FOR
DOING STUPID THINGS IN BANKING.
SHOULD HAVE LET THEM FAIL, NOT
PANIC, NOT CHANGE POLICY FOR THE
ENTIRE BANKING SYSTEM.
NEIL: THERE IS A PARALLEL HERE
THAT THE SVP EXECUTIVE IN CHARGE
WAS A FORMER LEHMAN CFO.
I DON’T KNOW IF THERE IS
ANYTHING TO THAT BUT I DO WANT
TO GET YOUR TAKE ON THE MARKET
RESPONSE TODAY.
YOU KNOW, OBVIOUSLY FEELING THAT
WE JUST DODGED A BULLET, WHETHER
THAT IS SHORT-LIVED OR NOT I
HAVE NO IDEA.
I’VE BEEN WATCHING WHAT IS GOING
ON IN THE CRYPTO ARENA.
YOU KNOW A LITTLE BIT ABOUT
THAT, SOARING AGAIN TODAY, A
COIN WELL OVER $25,000.
WHAT IS GOING ON THERE AND HOW
DO YOU EXPLAIN THAT?
>> WELL, THE CRYPTOCURRENCY
SPACE, GRANDDADDY OF THEM ALL
BEING BITCOIN IS GOING TO FIB
BRILL LATE BETWEEN 17,000,
25,000, UP AND DOWN AND UP AND
DOWN WHILE THIS GOES ON BECAUSE
IT IS NO DIFFERENT THAN ANY
OTHER RISK ON ASSET.
WHEN YOU FEEL THE FED IS GIVING
YOU A PUT, THEN YOU’RE GOING TO
BUY INTO IT.
THAT IS WHAT’S HAPPENED BUT THE
TRUTH IS ABOUT BITCOIN,
EVERYBODY SHOULD REALIZE THIS, I
DO A LOT OF WORK WITH SOVEREIGN
WEALTH INDEXING, NONE OF THEM
OWN ANY OF THIS STUFF.
THE IDEA BIG INSTITUTIONS ARE
COMING INTO BITCOIN IS A
FALSEHOOD.
THE REASON THAT IS THE CASE
GENSLER AND THE CONGRESS IS
LOOKING AT CRYPTO AND HASN’T SET
POLICY YET.
UNTIL THERE IS POLICY ON IT NO
BIG BOYS ARE GOING TO PLAY.
IF YOU LOVE A LOT OF VOLATILITY
BITCOIN IS YOUR GAME.
ALL KINDS OF HEDGE FUNDS PLAY
WIT, INDIVIDUAL INVESTORS BUT IF
YOU REALLY WANT TO SEE BITCOIN
BECOME A REAL ASSET OF CONSTANT
APPRECIATION AND A HEDGE AGAINST
INFLATION YOU GOT TO GET A ONE
TO 3% ALLOCATION IN SOVEREIGN
WEALTH AND PENSION DOMESTICALLY.
THAT IS NOT GOING TO HAPPEN
WHILE GENSLER IS ON THE WARPATH.
NOBODY WANTS TO TOUCH THIS THAT
HAS TO PLAY NICE WITH THE SEC
THAT INCLUDES ALL THE WORLD’S
PENSION PLANS WHO PUT MAJORITY
OF INDEXING IN S&P 500.
THEY DON’T WANT TO MESS AROUND
WITH A ASSET CLASS THAT GENSLER
DOESN’T LIKE.
BELIEVE ME HE DOESN’T LIKE IT
BECAUSE IT IS NOT REGULATED AND
HE WILL GO AFTER EVERYBODY
PLAYING WITH IT AND UNTIL HE IS
FINISHED IT WILL BE DIFFICULT TO
OWN LONG TERM.
IT IS FUN TO WATCH IT MOVE
BETWEEN 17 AND 25, MAYBE HIGHER
BUT IT IS NOT BIG BOYS CURRENCY